Frankfurt/Toronto, Nov. 29 (Reuters): ThyssenKrupp AG has offered 3.5 billion euros ($4.1 billion) to buy Canada’s Dofasco Inc, topping a hostile bid by European rival Arcelor SA, as Germany’s largest steelmaker seeks to boost sales in North America’s automotive steel market.
ThyssenKrupp said on Monday its offer of C$61.50 per share ' which was approved by Dofasco’s board ' could be raised if there were a counter-offer for the Hamilton, Ontario-based steelmaker, which is Canada’s largest by sales.
Arcelor said it would review ThyssenKrupp’s offer for Dofasco before deciding if it would make a counteroffer.
“It’s still too early to say that we aren’t still interested in Dofasco,” chief executive Guy Dolle said at a conference in Rio de Janeiro.
“We still haven’t analysed the content of the proposal of Thyssen. It’s not a surprise to us. We knew they were talking,” said Dolle, who spoke in French.
“Any decision we take will be in line with our values and those of our shareholders.”
The market “still hasn’t accounted for the mine purchased by Dofasco,” he added.
Arcelor made a hostile bid for the Canadian company on November 23, offering $3.75 billion.
ThyssenKrupp’s offer, which was unanimously recommended by Dofasco’s board, values Dofasco at six times 2006 estimated core profit, compared with Arcelor’s 5.3 times, according to Dutch bank ING.
Analysts, however, expressed concern about the price being paid by ThyssenKrupp, and stock in the German company closed 1.6 per cent lower at 17.28 euros, making it the second-biggest loser on Frankfurt’s blue chip DAX index.
“The market concern is clearly that they are overpaying, and that’s the risk,” said Michael Tappeiner, an analyst at WestLB. “The premium of 9.8 per cent compared to the Arcelor offer is just very hefty.” ThyssenKrupp said there would be no job cuts at either company because there was expected to be very little overlap between them. It added that the deal, which it plans to finance with cash, would add to earnings in the first year.
“We wonder if this deal will bring enough synergies to justify this price,” said ING analyst Alain William.
ThyssenKrupp’s offer comes amid a flurry of deals in the steel industry. Earlier this year, Mittal Steel made itself the world’s biggest steel company after buying US-based International Steel Group in a deal worth $4.5 billion. Analysts valued the deal at 6.2 times 2004 core profit.
Steelmakers are flush with cash after a spate of record profits over recent years. Now they are looking for acquisition targets as prices have slipped in the past few quarters and demand, driven by Chinese economic expansion, has cooled.